When the net income of the combined companies after a merger exceeds the sum of the net incomes prior to the merger, ____ is said to exist.
A)goodwill
B)synergy
C)leverage
D)greenmail

Question

Quizplus · Accepted Answer

Synergy is the term used to describe the increased efficiency and profitability that results from a merger or acquisition. When the combined net income exceeds the sum of the net incomes prior to the merger, it is a clear indication that synergy is present. Goodwill refers to the intangible assets that are acquired in a merger, leverage refers to the use of debt to finance a merger, and greenmail refers to a practice where a company buys back its own stock from an unfriendly investor at a premium price in order to avoid a takeover.

When the Net Income of the Combined Companies After a Merger